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    PRA Updates Pre-Issuance Notification Regime for Capital Instruments

    March 10, 2020

    PRA published the policy statement PS5/20, which contains amendments to the Pre-Issuance Notification, or PIN, regime for PRA-authorized Capital Requirements Regulation (CRR) firms. PS5/20 also provides feedback to responses to the consultation paper CP20/19, which proposed amendments to the Pre-Issuance Notification regime. The proposals were intended to reflect the adoption of amendments to Part Two of the CRR via CRR2 and to make improvements identified through the PRA assessment on the quality of capital instruments. The changes in PS5/20 take effect from April 01, 2020.

    PS5/20 contains the final policy on amendments to the Definition of Capital Part of the PRA Rulebook, an updated supervisory statement (SS7/13) on definition of capital (CRR firms), an updated Pre-Issuance Notification form, an updated common equity tier 1 (CET1) compliance template, and a summary table showing the final clarification of "sufficiently in advance" notification and "substantially the same" terms (as defined in updated SS7/13). The policy set out in PS5/20 has been designed in the context of the withdrawal of UK from EU and entry into the transition period, during which time UK remains subject to European law. PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with EU take effect. PRA has assessed that the proposals would not need to be amended under the EU (Withdrawal) Act 2018 at the end of the transition period. 

    The Pre-Issuance Notification rules are designed to enhance and maintain the quality of capital resources of firms by providing PRA with the opportunity to comment on the terms and conditions of the proposed capital instruments prior to the issuance of, or amendments to, such instruments. In CP20/19, PRA proposed a number of changes to the Pre-Issuance Notification regime for CRR firms. PRA intended the proposed improvements to make the Pre-Issuance Notification regime more risk-sensitive and proportionate and to allow firms greater flexibility in issuing or amending capital instruments. PRA has received three responses to CP20/19, with respondents being generally supportive of the proposals and making a number of observations and requests for clarification. 

     

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    Effective Date: April 01, 2020

    Keywords: Europe, UK, Banking, CRR, CRD IV, CRR2, CET1, Regulatory Capital, PIN Regime, PS5/20, CP20/19, SS7/13, Basel III, PRA

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